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1. Duty to follow principal’s directions or customs (Sec. 211): The first duty of every agent is to act within the scope of the authority conferred upon him and perform the agency work according to the directions given by the principal. When the agent acts otherwise, if any loss be sustained, he must make it good to the principal, and if any profit accrues, he must account for it. Illustrations: (a) Where the principal instructed the agent to warehouse the goods at a particular place and the agent warehoused them at a different warehouse which was equally safe, and the goods were destroyed by fire without negligence, it was held that the agent was liable for the loss because any departure from the instructions makes the agent absolutely liable (Lilley vs Doubleday). (b) An agent being instructed to insure goods neglects to do so. He is liable to compensate the principal in the event of these being lost (Pannalal Jankidas vs Mohanlal).
If the principal has not given any express or implied directions, then it is the duty of the agent to follow the custom prevailing in the same kind of business at the place where the agent conducts business. If the agent makes any departure, he does so at his own risk. He must make good any loss so sustained by the principal.
Illustrations (Appended To Sec. 211): (a) A, an agent, engaged in carrying on for B a business, in which it is the custom to invest from time to time at interest, the moneys which may be in hand, omits to make such investments. A must make good to B the interest usually obtained by such investments. (b) B, a broker, in whose business it is not the custom to sell on credit, sells goods of A on credit to C, whose credit at the time was very high. C, before payment, becomes insolvent. B must make good the loss to A, irrespective of his good intentions. 2. Duty to carry out the work with reasonable skill and diligence (Sec. 212): The agent must conduct the business is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. Further, the agent must act with reasonable diligence and to the best of his skill.
If the agent does not work with reasonable care, skill (unless the principal has notice of his want of skill) and diligence, he must make compensation to his principal in respect of ‘direct consequences’ of his own neglect, want of skill or misconduct. But he is not so liable for indirect or remote losses. Illustrations (Appended To Sec. 212): (a) A, a merchant in Kolkata, has an agent B, in London, to whom a sum of money is paid on A’s account, with orders to remit. B retains the money for a considerable time. A, in consequence of not receiving the money, becomes insolvent. B is liable for the money and interest from the day on which it ought to
have been paid, according to the usual rate, and for any further direct loss such as loss by variation of rate of exchange, but nothing further.
(b) A, an agent for the sale of goods, having authority to sell goods on credit, sells to B on credit, without making the proper and usual enquiries as to the solvency of B. B, at the time of such sale, is insolvent. A must make compensation to his principal in respect of any loss thereby sustained. 3. Duty to Render Accounts (Sec. 213): It is the duty of an agent to keep proper accounts of his principal’s money or property and render them to him on demand, or periodically if so provided in the agreement. 4. Duty to communicate (Sec. 214): It is the duty of an agent, in cases of difficulty, to use all reasonable diligence in communicating with his principal, and in seeking to obtain his instructions, before taking any steps in facing the difficulty or emergency. 5. Duty not to deal on his own account (Sees. 215 and 216):
An agent must not deal on his own account in the business of agency; i.e., he must not himself buy from or sell to his principal goods he is askedto sell or buy on behalf of his principal; without obtaining the consent of his principal after disclosing all material facts to him. If the agent violates this rule, the principal may repudiate the transaction where it can be shown that any material fact has been knowingly concealed by the agent, or that the dealings of the agent have been disadvantageous to the principal. The principal is also entitled to claim from the agent any benefit which may have resulted to him from the transaction. Illustrations: (a) A, directs B to sell A’s estate. B buys the estate for himself in the name of . A, on discovering that B has bought the estate for himself may repudiate the sale, if he can show that B has dishonestly concealed any material fact or that the sale has been disavantageous to him. [Illustration (a) Appended to Section 215 (b)A directs, B, his agent, to buy a certain house for him. B tells A that it cannot be bought and buys the house for himself. A may, on discovering that B has bought the house, compel him to sell it to A at the price he gave for it. [Illustration appended to Section 216]
6. Duty not to make any profit out of
his agency except his remuneration
(Sees. 217 and 218):
An agent stands in a fiduciary
relation to his principal and therefore
he must not make any profit (secret
profit) out of his agency. He must
pay to his principal all moneys
(including illegal gratification, if any)
received by him on principal’s
He can, however, deduct all moneys
due to himself in respect of his
remuneration or/and expenses
properly incurred. If his acts are not
bonafide, he will lose his
remuneration and will have to
account for the secret profit to his
7. Duty on termination of agency by
principal’s death or insanity (Sec.
When an agency is terminated by the
principal dying or becoming of
unsound mind, the agent must take,
on behalf of the representatives of
his late principal, all reasonable
steps for the protection and
preservation of the interests
entrusted to him.
8. Duty not to delegate authority
Subject to six exceptions stated
earlier (under the heading Delegation
of Authority), an agent must not
further delegate his authority to
another person, but perform the work
of agency himself.